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To correspond with a new focus on channels, YouTube has announced a new ad model that will see the site attempt to monetise partnerships with Reuters, Sony, Warner Brothers, Universal – and just this week, Disney UK.
The new channel sponsorships will include display, overlay and pre-roll ad options for 96 different channels, all providing original content to YouTube, with pricing varying according to sector and length of contract.
Channel producers are said to make money from ad impressions that run on the videos they create or curate within the channel, but only after YouTube recoups its initial investment of production costs with them - which ranges from a few hundred thousand to $5 million. This is expected to take a year for most channels, and following this revenue will be shared equally.
According to a rate card distributed to ad agencies, two hot verticals -- music and pop culture -- were $62 million apiece for one-year sponsorships, a package of sports channels was $40 million, an autos package was $16 million and a mom's interest package $10 million. YouTube has since subdivided the verticals into smaller packages in categories such as "Celebrity News," "Music and Film" or "Geeks, Gadgets and Games," which cost $10 million to $20 million to sponsor. YouTube also lets advertisers exclusively sponsor a single channel for anywhere from $2 million to $4 million on an annual basis.”
The deals work out to $15 to $25 per thousand views, competitive with broadcast TV ad rates. At a low-end sponsorship cost of $500,000 a month, an advertiser would need roughly 25 million impressions to net a $20 CPM -- unlikely for most start-up channels.
YouTube started conversations with brands and agencies in November, but to secure exclusivity, buyers also had to make a broader investment in YouTube ads.
According to Ad Age, this resulted in a guarantee that just 20% of the ads would appear on a desired channel, with the rest running in other videos on YouTube.
Among those reported to have signed up initially are: Unilever, which will be sponsoring the Young Hollywood Network channel for $10m, Toyota in relation to Cafe Mom, Kin Community and Mom’s View, also for $10m, while GM is said to be spending $5m for a package of channels in the Automotive category that includes Red Bull’s action sports channel. Chrysler, AT&T and Lowes have also been mentioned, but with no specifics.
This is good timing for YouTube, it’s been strengthening its channel offering for some time, and people are already bought-in and impressed by the array of publishers producing unique content for the site.
Though figures seem astronomical, they’re not when compared to the cost of TV advertising – and as more attention shifts online, advertisers shifting big bucks to digital so that they can tick that box is something YouTube is obviously betting heavily on.